Iron ore pushes dollar to five-week low

DOLLAR drops below 103.00 US cents for first time in five weeks as falling iron ore prices stoke fears about the economy.

THE dollar has dropped below the 103.00 US cent mark for the first time in five weeks as falling iron ore prices stoke fears about the country's resource-heavy economy.

At 12pm AEST today, the currency was trading at 102.92 US cents, down from 103.36 cents yesterday.

ANZ foreign exchange strategist Andrew Salter said a sharp fall in iron ore prices over recent days had pushed the currency lower.

"The movement in iron ore prices has surprised a number of participants and the lower the iron ore price the lower the fundamentals value for the Australian dollar," he said.

He said market caution ahead of a key speech by US Federal Reserve chairman Ben Bernanke had prevented the currency from falling further.

There is speculation Dr Bernanke will signal a fresh round of economic stimulus for the US when he addresses a summit of central bankers from across the globe at Jackson Hole, Wyoming tonight (Australian time).

"Any policy announcement from the Federal Reserve which signalled more quantitative easing would be a positive for the Aussie dollar," Mr Salter said.

The dollar also fell to a a five-week low against the Japanese yen of 80.73 yen and a nine week low against the euro of 82.16 euro cents during morning trade.

Meanwhile, the bond market was firmer at noon.

At 12pm AEST today, the September 10-year bond futures contract was trading at 96.985 (implying a yield of 3.015 per cent), up from 96.965 (3.035 per cent) yesterday.

The September three-year bond futures contract was at 97.540 (2.460 per cent), up from 97.500 (2.500 per cent).